Accelerating Open Banking

Accelerating open banking

How the Nordics are driving new opportunities across industries. A white paper by Nordic API Gateway

May 2020 Empowering frictionless financial futures for all

The open banking platform Nordic API Gateway is the only API aggregator that offers full coverage of all business and personal bank accounts in the Nordics and soon the rest of Europe. With its in-depth market approach, Nordic API Gateway was founded to standardise the format of financial data and payments, enabling frictionless financial futures for all industries. Today, the technology behind Nordic API Gateway powers more than 50 companies including major banks, such as Danske Bank, Jyske Bank, OP Financial Group and DNB, as well as payment providers, accounting systems and SMBs, with access to real-time data and low-cost payment options.

In early 2020, Nordic API Gateway commissioned a survey of more than 100 decision makers within the financial sector and payments industry, and accounting service providers across the Nordics – Denmark, Sweden, Norway and Finland – with the aim to assess the status of the Nordic region on its approach toward open banking. Interviews were monitored to ensure as balanced a spread as possible across country, sector, number of employees and turnover.

An important message

Because the survey was conducted before the Coronavirus found a foothold in Europe, this report does not take the extraordinary situation into consideration. Therefore, the data set does not account for any possible changes in priorities for the surveyed businesses and institutions that could have occured due to the COVID-19 crisis.

Contents

Foreword...... 4

1 Open banking at a glance...... 6

2 Why the Nordics are the perfect fit for open banking...... 10

3 How the Nordics are driving open banking solutions...... 20

4 The transformative power of open banking...... 30

5 Conclusion...... 36

Appendix: Nordic survey on open banking...... 38 Awareness of PSD2 and open banking across the Nordics...... 39

In less than six months, industries have already made changes...... 40

The Nordics are leading the new era of innovation...... 42

Who will benefit the most from access to financial data through open banking platforms?...... 43

The impact of open banking on the Nordic economy...... 44

Access to financial data through open banking technology as an opportunity for businesses...... 45

How will open banking change the business landscape in the Nordics...... 46

The Nordics are moving at a good pace in response to the directive...... 47

Resources are the biggest challenge across industries when answering to PSD2...... 48

Don’t miss out on your open banking opportunities...... 49 Foreword

Every single minute, nearly 500,000 tweets1 are being sent and 3.3 million Facebook posts2 are being posted. Almost a a million and a half Tinder swipes3 and more than 188 million emails4 are sent. More than 694,400 hours5 of Netflix are being watched – and the list keeps on going.

As the amount of information being shared manage your bank account from home became around the world has exploded over the last a reality in 1999, when banks across Denmark decade, it has become obvious that we’re in introduced online banking. Digital initiatives from need of tools that help us manage and process Nordic banks and governments have indeed this enormous amount of data. In the age of had a great impact on the way we think about digitalisation, convenience has become a financial services in Denmark, Sweden, Norway buzzword that has captured the expectations and Finland. we have for the services we allow into our lives. With the EU’s revised Payment Services For hundreds of years financial data, such as Directive, PSD2, it’s not only up to the banks account information and spending history, and governments to develop more convenient has been protected by laws and regulations. financial services. The forward-thinking directive To create more convenience, however, that has introduced an array of new reforms that are data is now slowly being opened up for aimed at increasing innovation, transparency innovation in any sector, fostering an equal and competition across the EU to create a level playing field. playing field for all businesses to the benefit of This movement started early in the Nordics. the consumer. And because of the high degree of Since the early 1980s, the Nordic countries have digitalisation amongst the Nordic population and adopted a digital mindset when it comes to businesses, PSD2 and open banking seem to be a money. To offer a more convenient alternative to perfect fit for the Nordics. cash payments, the Danish national debit card, Dankort, was introduced in 1984. The ability to

4 | The Nordics are accelerating open banking opportunities across industries. To provide better insight on the current state of So, what are the opportunities right now in PSD2 and open banking in the Nordics and the open banking for businesses? What steps have rest of the EU, Nordic API Gateway has conducted companies and financial institutions taken so a survey amongst Nordic decision makers far in the Nordics? And are there any further within the financial sector, payments industry learnings here for other European regions? and accounting services. The results have been Discover the answer to these questions and impressive. Less than six months after PSD2 went much more in the next pages. into full effect, more than 75% of those surveyed have made at least one change to their business Happy reading! because of the directive. More than 80% see access to financial data as an opportunity for their business.

Rune Mai

CEO, Nordic API Gateway

Foreword | 5 Open banking 1 at a glance Open banking and PSD2 are now in full effect, and there are several reasons why companies need to sit up and not only pay attention, but also take immediate action. This need for awareness and action is clearly supported by Nordic API Gateway’s newly commissioned survey, composed of more than 100 decision makers within the financial sector, payments industry and accounting services across Denmark, Sweden, Norway and Finland.

An overwhelming majority of decision makers Due to the lack of bank APIs, however, accessing (91%) are aware of PSD2 only six months after financial data through workarounds like screen it went into full effect. Fifty-five percent of scraping and reverse engineering became those decision makers have stated that they a necessity for fintechs wanting to develop know, in detail, what PSD2 is about and what innovative services on top of financial data during implications – opportunities and challenges – the years leading up to PSD2. it is expected to have on businesses and the At that time, most banks saw no advantages to overall market going forward. sharing account data that had always been under Accessing and collecting real-time financial data their watch. A more tangible concern was that from bank accounts and using it to build value- screen scraping from a bank’s online or mobile adding financial services has been intriguing to solution could potentially, according to the banks, third-party providers (TPPs) within the fintech endanger the integrity and security of online space, long before the EU Commission passed banking. the directive requiring all European banks to open up their payment accounts.

“ Open banking and PSD2 are now in full effect, and companies need to sit up and not only pay attention, but also take immediate action.”

6 | The Nordics are accelerating open banking opportunities across industries. The impact of open banking on financial institutions

Regulation/compliance requirements:

●● Deliver the same functionalities through APIs as they do via their own channels to regulated third parties ●● Deliver unified fallback options in case of downtime or missing functions ●● Support third party integration through tooling and documentation ●● Deliver strong customer authentication (SCA) solutions to customers

Business opportunities:

●● Build consumer-centric products and services ●● Empower customers with a full financial overview, automation and credit scoring through account aggregation ●● Build instant business solutions with payment initiation from accounts in other banks ●● Partner with other services for innovation ●● New revenue streams through premium APIs and partnerships

There is little doubt that the intense discussions With the adoption and enforcement of PSD2, all across Europe in the years leading up to PSD2 European banks are now obliged to open up their contributed to the EU Commission’s decision to customers’ financial data and allow both licensed eventually revise the original Payment Services TPPs and smaller businesses to access it in order Directive (PSD1). Some of the prevailing concerns to build better-than-ever services without having contributing to this revision include: to worry about PSD2 complexities.

●● The emerging fintech industry’s need for a level playing field in terms of competition with incumbent financial institutions ●● Fintechs’ need for better opportunities to pursue their business ideas ●● Some banks’ limited desire to collaborate and share data

Open banking at a glance. | 7 The EU Commission’s decision to implement possibilities for all. I think it’s so exciting that perhaps the most progressive and effective piece the monopoly on payments has been broken. of legislation ever in the history of the European I want to see even more innovative solutions in financial industry – PSD2 – was influenced by the market.” 6 the evolving movement of fintechs across the As the commissioner points out, PSD2 is in the continent and the new demand for openness. business of healing a fragmented market, while at On the other hand, without the bold move of the the same time breaking monopolies and opening regulators and without PSD2, open banking would up for new players, new business models and new never have gained the extraordinary level of types of cooperation. This cooperation pertains traction it experiences today – not only in the EU to, not least, the dynamic between banks and zone, but globally. fintechs, which is, to a large degree, what open The European Commissioner for Competition, banking revolves around today. Margrethe Vestager, stated in a 2017 interview Margrethe Vestager, who hails from Denmark, about PSD2 and the EU that: highlights the PSD2 opportunities for smaller “This could not be done without the EU and the member states, in particular. We will take a opportunities the EU creates. The opportunities closer look at these opportunities in the following for innovative companies in smaller member chapter, when we explore PSD2 and open banking states would not have been so far-reaching as seen from a Nordic perspective. without the EU. PSD2 brings a fragmented market back together and, as such, opens for great

“PSD2 brings a fragmented market back together and, as such, opens for great possibilities for all.”

8 | The Nordics are accelerating open banking opportunities across industries. Open banking at a glance. | 9 Why the Nordics 2 are the perfect fit for open banking

When the EU directive PSD2 required banks to provide dedicated APIs for external use in September 2019, every member state of the European Union had to adopt changes that were set to open up and create a more competitive and transparent financial industry. As a result, banks no longer hold the monopoly on financial data, and consumers are now able to share their spending data with innovative businesses to enjoy a wider range of financial services. Because PSD2 allows all third party providers to initiate direct account- to-account payments, businesses and consumers have also been empowered with the option to opt in for lower-cost and more secure payments.

Figure 1. To what extent are you aware of PSD2? Since the implementation of PSD2, the Nordic countries have proven to be in an extraordinarily good position within the European open banking space. In our survey, we asked more than 100 5% decision makers in the financial industry in 4% the Nordics about their readiness for PSD2. An overwhelming majority of those asked answered that they have been awaiting the arrival of PSD2 for quite some time. More than half of the decision makers (55%) stated that they are ‘fully aware’ of PSD2, whereas only 5% ‘knew Awareness nothing about PSD2’. 36% of PSD2 55% But why are the Nordics the perfect fit for open banking? Why does it seem that the Nordic countries have made a cohesive and impressive directive adoption in a matter of months?

To answer that, we need to look at buzzwords such as “digitisation”, “tech-savviness” and the “openness” to new technology.

Fully aware of PSD2 Aware of PSD2 only by name Aware of PSD2 but not in detail Know nothing about PSD2

10 | The Nordics are accelerating open banking opportunities across industries. The most digitised region in Europe

According to an index from the European “The Nordic governments have also undertaken Commission in 20177, Denmark, Sweden and strong efforts to digitalise their own operations. Finland were ranked as the most digitised One example is the introduction of digital countries in all of Europe, as demonstrated in signatures and postboxes, which serve as the Figure 2 below. Thanks to the Nordic governments’ cornerstone of many digital services. Using these efforts to create digitised societies, the Nordics technologies, citizens are now able to go online are truly digital front-runners, as it is also to file their tax reports, apply for unemployment mentioned in the report Digital Nordic: Staying benefits or register a change of address.”8 Ahead of the Digital Agenda from 2018, which highlights that:

Figure 2. Digital Economy and Society Index, 2018 rankings. Source: (European Commission, 2017c)

80 Connectivity Human capital Use of internet services 70 Integration of digital technology Digital public services 60

0 FI IE SI IT DK SE NL LU UK BE EE ES AT MT LT DE EU PT CZ FR LV SK CY HR HU PL BG EL RO

The European Commission’s Digital Economy and Society Index (DESI) is a composite index that benchmarks relevant indicators on digital performance and tracks the evolution of the EU as a whole and its member states in digital competitiveness.

Why the Nordics are the perfect fit for open banking. | 11 To a much larger extent than other European Ultimately, that means that financial institutions, countries, Nordic governments have pushed for businesses and consumers across the Nordics a digital agenda at an early stage. In the report have adopted a more digital and tech-savvy Governing the Digital Transition in the Nordic mindset in their everyday lives. Regions from 2019, the international research Of course, the point of describing how digitisation, centre, Nordregio, which is established by the tech-savviness and openness characterise Nordic Nordic Council of Ministers, states: societies is to show why the Nordic region is the “The Nordic countries are widely accepted as perfect fit for open banking. This point is further digital front-runners in the European and even explored in an analysis from S&P Global: global context. Thus, perhaps unsurprisingly, “The Nordics have long been on the leading edge all Nordic countries are in the process of of digital innovation and use of digital technology implementing national strategies related to […] The banking industry is no exception and digitalisation. Overall, these policies have fairly Nordic banks are digital front-runners that started similar goals, with a focus on digital public investing early in digital banking services.”10 services, supporting growth and innovation in business and ensuring digital security.”9

“ Financial institutions, businesses and consumers across the Nordics have adopted a more digital and tech-savvy mindset in their everyday lives.”

12 | The Nordics are accelerating open banking opportunities across industries. Openness to new technology

The Nordic governments’ readiness to embrace The latest example of Nordic cross-national open banking is not only due to the high level banking cooperation was launched less than of digitisation. In 2006, the five Nordic national a year ago and is the comprehensive clearing banks published the joint report Nordic Banking infrastructure project for real-time, multi-currency Structures, which asserts that the Nordic banking cross-border payments called 'P27', which involves sector’s openness to new technology banks from Denmark, Sweden and Finland. and innovation is striking: In light of the Nordic countries’ long tradition “The use of new technology in banking is of openness to new innovation12, it is no wonder common in the Nordic countries. Nordic banks Nordic banks also have a tradition of adopting have succeeded in taking advantage of modern new technology. Perhaps this explains why more banking technology in business operations so than 75% of the Nordic decision makers surveyed as to reduce costs and improve efficiency. One have made at least one change to their business reason for this is that the banking crises in the late because of PSD2 less than six months after the 1980s and early 1990s in some Nordic countries directive went into full effect. forced banks to dramatically improve efficiency and increase the use of new technology. Common attitudes towards modern technology and its usage have been positive in the Nordic countries. Banks and their customers have been open to new innovations and their applications in banking. This development has substantially affected distribution channels and services.”11

●● Robust culture of interoperability between authentication solutions in the Nordics ●● Strong and secure national identity solutions across Nordic countries ●● Pioneering tradition of digital payments in the Nordics, with Denmark introducing national debit card Dankort in 1984 and Norway launching national payment system BankAxept in 1991 ●● More than 85 Danish banks combining to form a national payment clearing service, which is operated by the largest Nordic payment company, Nets

Why the Nordics are the perfect fit for open banking. | 13 “ More than half (53%) of the surveyed answered that they have already invested in new technology as a result of PSD2, while 50% already developed new products and/or features.”

Figure 3. Which, if any, of the following changes has your business made as a result of PSD2 coming into effect? (Multiple choice)

60% 53% 50% 50% 46% 45% 40% 43%

30% 35%

20% 24% 18% 10% 7% 0%

processes Adopted new None of these Investedtechnology/ in new Made staffing/ and/or features Automated internal working practices Made improvements IT infrastructure to customer service personnel changes Madeto other internal efficiencies processes Developed new products

The research found that more than half (53%) of This gives a good indication of why the open those surveyed answered that they have already banking adoption rate among Nordic banks and invested in new technology as a result of PSD2, the level of mature APIs provided by the banks for while 50% have already developed new products the companies are significantly higher compared and/or features. In particular, the one change to the rest of the EU. If we look to the UK, a survey that is likely to have had the most impact on from 2019 indicated that the UK’s largest bank, business performance is the development of new HSBC, only had a Q1 uptime of 20% in 2019.13 products and/or features, with 40% stating this In other words, businesses could not rely on (see Figure 11). It perhaps stands to reason that receiving data from HSBC 80% of the time in those who view open banking as positive for the the first quarter of 2019. economy are also significantly more likely (58%) to have seen the most impact from the development of new products and/or features (see Figure 9). In total, 76% made at least one of the changes listed to their business due to PSD2.

14 | The Nordics are accelerating open banking opportunities across industries. Our survey also clearly indicates that the Nordic businesses on products and services, 64% of those countries are not lagging behind the rest of the EU surveyed answered that they tend to disagree or when it comes to product and service innovation; strongly disagree. Put differently, the Nordics see in fact, it is quite the contrary – according to the themselves as front-runners in building innovative Nordic decision makers themselves. When asked financial products and services. if the rest of the EU is ahead of Nordic financial

Figure 4. The rest of the EU is ahead of the Nordic financial businesses when it comes to product and service innovation.

40%

35% 30% 29%

20%

16% 10% 8% 8% 4% 0% Strongly Tend Neither agree Tend to Strongly Don’t agree to agree nor disagree disagree disagree know

“The Nordics see themselves as front- runners in building innovative products and services.”

Why the Nordics are the perfect fit for open banking. | 15 Nordic consumers are open to open banking

When it comes to PSD2 and open banking, there is are in a better position to quickly adjust to new no doubt that consumers play a central role. The open banking solutions. According to the report payment directive is all about giving back The Nordic Angle by Worldline, the high level of consumers control of their financial data, which digital savviness has indeed prepared Nordic means consumers are able to enjoy a wider range consumers for open banking: of financial services more than ever before. “This digital savviness, both in society in general As Nordic consumers have been early adopters and in the financial sector, gives the Nordic region of digitisation and relied on mobile use for a head start in terms of ability to handle the new everything from online banking, shopping and compliance requirements as well as to implement more, it is fair to argue that Nordic consumers new processes and services following PSD2.”14

“This digital savviness both in society in general and in the financial sector gives the Nordic region a head start.”

Allowing consumers to regain control of their from PSD2, followed by finance startups (24%), financial data makes them the big winners of payment providers (14%), small businesses PSD2. According to the research, almost half (7%) and retailers (5%). Only 3% of the surveyed (45%) of the surveyed decision makers point to decision makers answered that they believe banks consumers as those who will benefit the most will benefit the most from PSD2.

Figure 5. Which ONE of the following, if any, do you think will benefit MOST from banks having to enable third-party access to customers?

50%

45% 40%

30%

20% 24%

14% 10% 7% 5% 0% 3% 2% Consumers Finance Payment Small Retailers Banks Don’t know startups providers businesses

16 | The Nordics are accelerating open banking opportunities across industries. But why is it exactly that consumers are the One reason for this can be found in the inherent primary winners of open banking? How do trust Nordic consumers have in their governments, European consumers take advantage of PSD2? which are known for pushing a digital agenda. And why does it seem that Nordic consumers are Put differently, if Nordic consumers are taught particularly open to new technology? by the government that they should trust digital initiatives, then they trust it. While it seems that PSD2 gives consumers increased control and ownership of their financial Ultimately, that means Nordic consumers have data, there are other reasons to believe Nordic become used to interacting with all kinds of consumers are the perfect practitioners of open services in a digital way, also when it comes banking. To shed light on this, we need to look to data. Because of the Nordic trust in digital at terms such as “digital adoption rate”, “mobile services, Nordic consumers are more open to usage” and “trust in online services”. share their financial data to use convenient services such as personal finance management As mentioned earlier in this chapter, Nordic tools, loan calculators and automated governments and businesses are the most bookkeeping solutions. digitised in Europe, and the same goes for Nordic consumers. In fact, Denmark, Sweden, Norway and Finland are among the highest-ranking digitised regions in Europe.

“ PSD2 gives consumers increased control and ownership of their financial data.”

Why the Nordics are the perfect fit for open banking. | 17 The high level of trust in the digital space has led to a boom in digital payments and online shopping in the Nordics. In Denmark alone, ecommerce is set to increase by 10% – to €21.45 billion – by the end of 2020.15

Figure 6. The B2C ecommerce turnover (€) in Denmark, including goods and services. (Source: FDIH & Forecasted)

25 +10% +13% 20 21.45bn +11% 19.50bn +15% 17.30bn 15 +16% 15.57bn +18% 13.54bn +18% 10 11.68bn 9.91bn

Turnover (€bn) Turnover 8.39bn 5

0 2013 2014 2015 2016 2017 2018 2019 2020 (F)

According to the country guide report Online and Mobile Usage in the Nordics by IMRG16, the Nordic countries were already leading the ecommerce space in back 201217, when they were pointed out as the top 3 most online shopping populations in Europe.

Figure 7. Percentage of population that shopped online at least once during 2012. (Source: Danish Payments Council)

80%

70%

60%

50%

40%

30%

20%

10%

0% UK Italy Malta Spain FranceIcelandAustriaIreland PolandLatvia CyprusGreece NorwaySweden Finland BelgiumSlovakia Slovenia CroatiaEstonia Belgium Denmark Germany Hungary Portugal Lithuania Romania Luxembourg Netherlands Czech Republic

18 | The Nordics are accelerating open banking opportunities across industries. The same report indicates that mobile usage is only growing in the Nordic countries:

“[A]cross the Nordics, mobile adoption is gaining pace and should certainly be part of a merchant’s development roadmap, making full consideration of the mobile shopper’s experience both for browsing and completing online purchases.”18

As we have explored in this chapter, there are several reasons as to why the Nordics are a perfect fit for open banking. With a digital mindset and a high level of trust in online services, Nordic consumers have a natural openness to the opportunities that come along with open banking. The fact that the Nordic governments have pushed for a digital agenda at an early stage means that consumers across Denmark, Sweden, Norway and Finland have an open mind to new technology and services today. With more than half of those surveyed having implemented new technology or developed new products as a result of PSD2 less than six months after the directive went into full effect, businesses, payment providers and financial institutions are ready to take on the opportunities of open banking.

Why the Nordics are the perfect fit for open banking. | 19 How the Nordics 3 are driving open banking solutions

Just six months after banks were required to provide dedicated APIs for external access, financial institutions, businesses and payment gateways have moved the focus from compliance to opportunity.

To get an indication of how many businesses But given that the Nordic countries are relatively are already using open banking to provide small and only make up a total population of innovative and convenient services, it is 27 million (compared to a UK population of 67 interesting to look at the growing number million), it becomes clear that the Nordic region, of TPPs across the EU. as a whole, is ahead when it comes to attracting TPPs. Despite the fact that the UK has the With London’s long-standing position as a highest number of domestic TPPs, the Nordics leading European fintech hub, the UK has seem to be the perfect place to test open pushed the PSD2 agenda forward and, up banking services. until now, maintained a position as a leader in open banking.

Figure 8. TPPs per million inhabitants (February 2020). (Source: FCA, The Financial Services Register) 15

Domestic TPPs

Passported TPPs

0 UK Italy Spain Poland France Finland Norway Sweden Austria Belgium Denmark Hungary Germany Netherlands

20 | The Nordics are accelerating open banking opportunities across industries. “The Nordic region, as a whole, is ahead when it comes to attracting TPPs.”

As can be seen in Figure 8, the number of TPPs One possible reason is that the Nordic countries passporting into the Nordics is at a very high are known for being ideal test beds when it comes level compared to the size of the population. This to trying out new tech solutions, due to their indicates that there is a rising interest from foreign relatively small population sizes and high levels TPPs to try out new business opportunities in the of digitisation and tech-savviness. Another likely region. Of course, this raises an important question: reason is the fact that the Nordic region now offers Why is there this outside interest in the Nordics? high-quality API aggregation services for TPPs.

A win for consumers, businesses and the Nordic economy

Seen from a Nordic perspective, the European Figure 9. Do you think PSD2 has had a positive or Commission is likely to succeed with some of the negative impact on the Nordic economy? core ambitions through PSD2, more specifically to give consumers better control over their own financial data and access to more innovative 8% financial services. 11%

The survey confirms that the Nordic potential 5% in the field of open banking is significant. The development brought on by open banking and PSD2 within the Nordic financial services industry is widely known only six months after the PSD2 PSD2 deadline in September 2019, but is generally met positive or with optimism in terms of the economic impact, as demonstrated in Figure 9. 29% negative As is shown, nearly 60% of the decision makers impact believe that PSD2 has already had a positive impact on the Nordic economy. None of the 47% decision makers surveyed viewed PSD2 as having a very negative impact on the Nordic economy.

Very positive No impact Very negative Fairly positive Fairly negative Don’t know

How the Nordics are driving open banking solutions. | 21 Figure 10. Access to financial data through PSD2 is an opportunity for your business.

50% 48%

40%

34% 30%

20%

10% 8% 5% 0% 3% 2% Strongly Tend to Neither agree Tend to Strongly Don’t agree agree nor disagree disagree disagree know

But it is not only the Nordic economy that is set to Considering that the market has only been able benefit from PSD2. Research shows that half (48%) to move since September 2019, these figures are of the asked decision makers strongly agree that quite remarkable. In addition to half of those PSD2 is an opportunity for their business. Adding surveyed strongly agreeing that PSD2 is an the 34% who tend to agree with the fact that PSD2 opportunity for their business less than six months is a business opportunity, an overwhelming 82% after the directive went into full effect, 71% stated of the surveyed decision makers are positive that the one change that is likely to have the most access to financial data and payment initiation impact on business performance is either the will give them new opportunities for their business. development of new products and/or features or the investment in new technology (see Figure 11), which demonstrates tremendous progress.

22 | The Nordics are accelerating open banking opportunities across industries. Figure 11. Which ONE of these changes that your business has made as a r esult of PSD2 has the most impact on business performance?

3% 4% 1% Developed new products 5% and/or features

Invested in new technology/ IT infrastructure 40% 8% Made improvements PSD2 to customer service Adopted new working impact on practices 8% performance Automated internal processes

Made other efﬁciencies to internal processes

Made stafﬁng/ personnel changes

31% None of these

“ The one change that is likely to have had the most impact on business performance is the development of new products and/or features.”

How the Nordics are driving open banking solutions. | 23 Jeppe Rindom

To give a better understanding of what new products businesses across the Nordics have been able to build thanks to PSD2, we have gathered a few examples from various industries.

New opportunities in the accounting space

There is no doubt that the accounting industry has been connected to long and manual processes for many decades. It is therefore clear to see that open banking has provided this industry with many benefits. One of the many companies to take advantage of the new opportunities is the Danish accounting software provider, Kontolink.

To make accounting easier for their users, Kontolink gained access to all Nordic banks and was quickly able to offer a new service that meets the future demands of accounting.

Kontolink’s mission was to create a ‘Tinder-style’ accounting solution that enables businesses to handle their accounting on the road. If the match between transaction and receipt looks correct, users swipe one way to approve it. If it looks incorrect, users simply swipe the other way to reject it. Kontolink CEO, Kim Agger, says:

24 | The Nordics are accelerating open banking opportunities across industries. “Because of open banking, we’ve been able to But it is not only Kontolink that has used real-time turn the accounting process upside down. Our data to create better services. Last year, the fast- system uses bank transactions and data from growing tech company Pleo used access to all the matched receipts to create the accounting Nordic banks to create smarter business expense entries. It’s a much more accurate and effective solutions for its customers. way to do accounting, as real-time bank data will Designed to reduce the burden of managing work as an instant reconciliation to validate that and approving expenses, Pleo is a smart the expense is true.” company card solution that decentralises With Kontolink’s app, users can easily take a photo company spending and simplifies bookkeeping. of their receipt, which will then be automatically Commenting on the new opportunities, the CEO matched to the bank transaction, as the app is of Pleo, Jeppe Rindom, says: connected to the bank account.

“ Before PSD2, one of our biggest hurdles was being able to see the transactions our customers were transferring to our account. This was a major pain point for us because it could prolong the time it took for the customers’ top-up payments to reach their prepaid cards. With the new setup, we’re able to see the transactions within just a few seconds and that has a huge value for our business and customers.’’

Jeppe Rindom, CEO at Pleo

How the Nordics are driving open banking solutions. | 25 How banks can leverage open banking beyond compliance

With the technical implementation of the EU One of the Nordic banks that has been at the directive in place, more banks have also realised forefront of this innovation is the largest bank the full potential of using PSD2 to build convenient in Finland, OP Financial Group. To keep up and user-driven solutions. Instead of focusing with customer demands, OP Financial Group on the compliance part, banks are starting to integrated both account information service become TPPs themselves in order to innovate with (AIS) and payment initiation service (PIS) into financial data from other banks, as well as gaining their offering. Commenting on the new the ability to initiate payments from one single opportunities, Masa Peura, SVP of Payments bank. With that, banks have the opportunity to and Personal Finance Management at OP own the customer interface. Financial Group, says:

“PSD2 creates new opportunities for banks and challenges the industry to evolve. At OP Financial Group, we want to be a front-runner in utilising these opportunities. Customer experience, reliability and security are the most important factors for us when selecting new partners and developing our services.”

Masa Peura, SVP of Payments and Personal Finance Management at OP Financial Group

The fact that large financial institutions are looking to use fintech companies as open banking partners demonstrates the new bridges between financial institutions and fintechs, which we will explore in the following section.

Masa Peura

26 | The Nordics are accelerating open banking opportunities across industries. Peter Schleidt

The power of collaboration

There has been a clear shift in financial One of the banks in Denmark embracing this institutions’ attitudes toward fintechs since this core opportunity is Jyske Bank. Commenting new and evolving industry first took off. In the on how fintechs can help banks, a member very early stages, the reaction from incumbent of the executive board at Jyske Bank, financial players was primarily scepticism. Peter Schleidt, says:

As the fintech hype started to build, a sort “We’re not going to be the ones who develop all of of uncertainty and concern began to grow our services in-house. We’d much rather be hand among financial institutions: Would the budding picking powerful business solutions and create undergrowth of fintech startups really be able our own ecosystem of functionalities,” he explains to eventually shake the position of the financial and adds: establishment? If so, what would be the clever countermove?

Now, delivering user-driven digital services is one of the core opportunities of open banking for both agile businesses and large financial institutions.

“ If a fintech with an attractive solution can integrate it in a cheaper, faster and better way than we’re able to do, we can offer compelling solutions and stay ahead of the emerging competition.”

Peter Schleidt, Executive Board Member at Jyske Bank

How the Nordics are driving open banking solutions. | 27 Etienne Bell

For the last 3-5 years, the Nordic fintech communities have been booming. This is in no small part due to fintech companies often working in close collaboration with Nordic banks and other financial institutions. And, in many cases, these institutions choose to support the fintechs’ ambitions by investing in them.

“When it comes to open banking, most banks are focusing purely on compliance. In other words, making their data available to their customers and third parties in time for when the new legislation kicks in. We’re taking this a step further and seeing how we can take this data and use it to develop new products and services for the benefit of our customers.”

Etienne Bell, Product Manager for Undock at Danske Bank

This trend of increasing collaboration between in the accelerator model (e.g. Nordea Startup fintechs and financial institutions is also Accelerator, OP Lab, DNB NXT Accelerator or documented in the study from S&P Global on Copenhagen FinTech Accelerator). This approach tech disruption in retail banking in the Nordics: has proven to be more cost effective and faster than developing in-house solutions, and we “We understand that the general approach to believe that Nordic retail banks will continue to tackling this challenge has been fairly similar follow a collaborative strategy with fintechs since across big banks in the Nordics. A prominent these partnerships enable them to stay relevant, strategy chosen by Nordic banks consists offer leading innovations and generate new of actively embracing collaboration and revenue in a rapidly evolving industry.”19 partnerships with fintechs, a good way of internalising knowledge, for example,

28 | The Nordics are accelerating open banking opportunities across industries. How the Nordics are driving open banking solutions. | 29 The 4 transformative power of open banking

As open banking has gained a solid foothold in the Nordics, how will it change financial services in the future? How do businesses across the industry leverage open banking to own the customer interface and build better and more user-driven solutions? This chapter will explore the transformative power of open banking and highlight some of the current trends in the financial services industry.

Figure 12. How do you think financial institutions opening their payment infrastructure and customer data to third parties will change the business landscape in the Nordics? (Multiple choice) 100%

90% 88% 75% 82% 81% 79% 68% 50% 58% 56%

25%

0% 1%

loyalty economy planning An increase in None of these AI technology More tech startups customer service A more prosperousImproved business Pressure to improveChallenges to major Decreased customer Increased competition payment providers

Owning the customer interface

For hundreds of years, banks have played an industry. Banks no longer only compete against important role as the trusted holders of financial other banks to own the relationship with the data. But as the implementation of PSD2 has customer. Instead, PSD2 has created a level forced banks to relinquish their monopoly on playing field for any industry in the race to financial transactions, we are starting to see own the customer interface. radical changes to the financial services

30 | The Nordics are accelerating open banking opportunities across industries. Because of this radical departure from tradition, service that allows consumers to handle different accounting software providers, for instance, tasks in a single place. are able to challenge banks by integrating a One of the front-runners in owning the customer full financial overview for customers in the interface is Norway’s largest bank, DNB. accounting platform. In doing so, bookkeepers Customers with accounts across several banks and accountants are able to skip the extra step of have been able to get a full financial overview going to the bank app to do bank reconciliations. from DNB’s mobile banking app since 2018. Now, On the other hand, banks are also able to own as a next-level open banking solution, DNB has the customer interface by integrating ERP and expanded its service by enabling their customers accounting software directly into the online to perform instant account-to-account payments banking app. Now a separate accounting platform from any bank within DNB’s mobile bank on their becomes redundant, as customers can handle road to becoming the favoured mobile banking their accounting and bookkeeping tasks in the app for all Norwegians.20 online banking app. Simply put, it’s all about creating the most convenient and user-centric

“It’s all about creating the most convenient and user-centric service that allows consumers to handle different tasks in a single place.”

The transformative power of open banking. | 31 Ingjerd Blekeli Spiten Explaining the advantage of owning the customer interface, Group Executive Vice President of Retail Banking at DNB, Ingjerd Blekeli Spiten, says:

“This is an important step in the direction of becoming the mobile bank for all Norwegians. We’re giving our customers huge flexibility as they’re now able to make payments and transfers between their own accounts across several different banks. For us, it’s all about making it easier for customers to gain a full financial overview no matter how many banks they might have.”21

Ingjerd Blekeli Spiten, Group Executive Vice President of Retail Banking at DNB

But it’s not only DNB that has taken advantage “As legislation, time and technology allow it, of open banking to own the interface. One of we believe that today’s accounting methods Denmark’s largest accounting software providers, should be changed radically. We are now able Dinero (which is owned by Visma Group), became to offer fully automatic accounting and provide one of the first fintechs in Denmark to make our clients with what we call a ‘virtual CFO’. use of real-time banking data through a single With a virtual CFO, 90% of our clients’ financial integration. The service automated accounting outlays will be accounted for and paid features, such as bank reconciliation, in no time, automatically. This means they never have checking and matching transactions with clients’ to reconcile or manually pay an invoice again, own records. And through a trusted API provider, because the bank transaction data in itself is Dinero enabled all of their customers to use the the future of accounting. This will greatly minimise service, regardless of which Nordic bank they the man-hours put into the work and the errors used for their bank account.22 that come with being human.”

This is something that will change the way we will look at the accounting space in the future, says David Andersen, Co-Founder and CPO at Dinero:

32 | The Nordics are accelerating open banking opportunities across industries. “ With access to real-time bank data or AI features, businesses are able to lower on-boarding time and reduce costs related to manual workflows.”

Optimisation and cost reduction

The advantage of open banking is not only about To create smarter and faster accounting solutions owning the relationship with the customer. Some for its customers, accounting services provider of the biggest benefits of open banking lie in the Billy recently acquired access to real-time data ability to optimise processes and reduce costs from Nordic banks, which allowed them to easily significantly. With access to real-time bank data build new features that enable businesses to skip or AI features, businesses are able to lower on- the manual process of employing their online bank boarding time and reduce costs related to to handle simple bookkeeping tasks.23 manual workflows. Now Billy’s customers are ‘pinged’ with Despite the fact that all businesses can use transactions from their bank account, which then automated access to financial data to optimise allows customers to perform bank reconciliation processes, the accounting space has proven to based on the bank transaction itself. This, in turn, be the perfect example of how much time and ensures that a customer’s bookkeeping is always money businesses can save with automated aligned with their bank account. access to financial data.

David Andersen

The transformative power of open banking. | 33 Jonas Midtgaard

To take bookkeeping to the next level, however, one cannot only look at the automation process alone. According to the CEO of Billy, Jonas Midtgaard, automation is also about making businesses more disciplined when it comes to accounting tasks – without even noticing it. He explains:

“The fact that you get pinged live with data from the bank saying ‘we need this invoice’ makes our customers more disciplined. Simply put, we nudge our customers to handle small tasks continuously to make the VAT settlement at the end of an accounting period smoother.”

Jonas Midtgaard, CEO at Billy

There are, of course, other industries besides “We’re striving for continuous integration, the accounting space that can benefit from continuous delivery, we want to increase the optimisation and cost reduction. Last year, the levels of automation and not have any manual Danish investment bank Saxo Bank managed configuration through that process. The to drastically reduce their manual customer commercial outcome of this is, if we can automate on-boarding efforts thanks to machine more and get faster cycle times for software learning. In an article published in delivery, then we can not only reduce the time Computerworld24, Saxo Bank’s Global COO of to market of features and new value-added Group IT, Richard Douglas, explained: items with customers, but also it improves our governance and control in the platform as well.”

34 | The Nordics are accelerating open banking opportunities across industries. Low-friction mobile payments are already leading the way

PSD2 has become a disruptive force within the Thanks to the arrival of PSD2, the opportunities payments space, impacting over 300 million within open banking are leading to further ecommerce shoppers in Europe alone.25 Some conveniences for businesses and consumers, and of the key advantages experienced already have a more level playing field for payment providers. been the ability to pay directly from a personal Consumers are ready to adopt and welcome new or business account more easily, protecting payment methods, and businesses have been financial data through a security increase by waiting for new opportunities to emerge. strong customer authentication (SCA), taking The time has come to remove the astronomical more ownership of one’s own credentials and the cost and friction of transaction fees and deliver a knowledge that log-in data is not stored after a fairer, more enjoyable experience for all payment is concluded. those involved. In addition to the reduced costs Speaking ahead of Europe’s largest payment associated with traditional credit card payments, conference, Merchant Payments Ecosystem one of the great benefits about account-to- 2020, CEO of Polymath Consulting, David Parker, account payments is the fact that consumers do forecasted that “...merchant payments will not have to share sensitive payment information. undergo radical changes in 2020, but not in all With the new payment landscape, account- markets. The key change will be driven by the to-account payments can easily be built into any introduction of PISP payments, which in card- solution. That’s something major payment based, online payment markets has been forecast providers like Apple and Google Pay or mobile to replace up to 30% of these transactions over payment platforms, such as Mobilepay or Vipps, the next five years.”26 have already done.

“The time has come to remove the astronomical cost and friction of transaction fees and deliver a fairer, more enjoyable experience for all those involved.”

The transformative power of open banking. | 35 Conclusion 5 The way we live our lives or run our businesses requires data to work for us, compete for our attention and, ultimately, make things easier and more efficient for us. That is why financial data needs to be made accessible and why we need technological innovation to make it meaningful.

As the research in this white paper has shown, Open banking is truly changing the market now the Nordic countries have placed themselves and, as the report has shown, a wide range of at the forefront of open banking, thanks to companies from across industries are already a high level of digitisation, tech-savviness prospering from the movement. and openness to new technology. Thus, the In general, the Nordics are attracting a great deal awareness of PSD2 is significant amongst of TPPs to the region, but most of the decision makers in the financial sector, developments are still taking place in the payments industry and accounting services background – companies ensuring compliance, in the Nordic countries, with 91% being automating processes, building interfaces and ‘fully aware’ or ‘aware’ of PSD2. providing account aggregation externally as a However, being aware is one thing, but acting minimum. The arrival of PSD2 has firmly pushed accordingly is something different. That is why it us into the age of the API. As the adoption of is nothing short of remarkable that 76% of those open banking increases, we will gain a better decision makers have already made at least one understanding of how behaviours, products and change to their business as a result of PSD2. services will become personally tailored.

“ Being aware is one thing, but acting accordingly is something different. That is why it is nothing short of remarkable that 76% of those decision makers have already made at least one change to their business as a result of PSD2.”

36 | The Nordics are accelerating open banking opportunities across industries. Financial institutions need to realise that interface rather than through those of the banks. competition is no longer the traditional kind. Banks also have the option to disintermediate They have seen this with the fintech boom other banks by offering a superior bank interface already, but what started out as head-to-head with aggregation of accounts from other banks. competition has now gravitated towards valuable PSD2 should be viewed as a gateway to growth. and innovative partnerships. With PSD2, any The opportunities are clear for developing a more licensed business can begin taking advantage of customer-centric and innovative offering, not just available data, and the early adopters are already an operational necessity. We need to develop this knocking on the doors of traditional banks. market together. The successful parties and Many of these companies are likely to try to partnerships will be the ones who view PSD2 as an disintermediate the banks in an attempt to drive opportunity to get to know their customers, both the traffic towards their own interfaces and businesses and consumers, better and deliver applications. This can be, for example, accounting more valuable services to them. platforms letting their users conduct most of their banking activities directly through the platform's

Conclusion. | 37 Appendix: Nordic survey on open banking

In early 2020, Nordic API Gateway commissioned a survey of more than 100 decision makers within the financial sector, payments industry and accounting services across the Nordics – Denmark, Sweden, Norway and Finland – with the aim of assessing the status of the Nordic region on its approach toward open banking.

The survey shows that there is generally an optimistic outlook on the enforced changes, followed by the initiative to develop and invest in innovative products and services:

●● Fifty-eight percent suggest the arrival of the While there is equally exciting opportunity for legislation will have a positive impact on the all the audience segments researched, 82% of region’s economy (Figure 9) respondents believe the democratisation of ●● In less than six months since the EU directive financial data, thanks to PSD2, is a major became law, more than half (53%) have invested opportunity for their business. in new technology and infrastructure (Figure 3) ●● Fifty percent have already developed new products and services (Figure 3)

38 | The Nordics are leading the way with open banking. Awareness of PSD2 and open banking across the Nordics

A vast majority (91%) of those surveyed were ‘fully aware’ (55%) or ‘aware, but not in any detail’ (36%) of PSD2. Not surprisingly, fintechs are more ‘fully aware’ (71%) than decision makers overall (55%). The fact is, all surveyed groups in the Nordic market are, to a high degree, aware of PSD2.

“ A vast majority (91%) [...] were ‘fully aware’ or ‘aware’ [...] of PSD2.”

Figure 1. To what extent are you aware of PSD2?

5% 4%

Awareness Fully aware of PSD2 Aware of PSD2 but not in detail 36% of PSD2 55% Aware of PSD2 only by name Know nothing about PSD2

Appendix: Nordic survey on open banking. | 39 In less than six months, industries have already made changes

Which, if any, of the following changes has your business made as a result of PSD2 coming into effect?

Seventy-six percent of the businesses surveyed ●● Seventy-six percent have made at least answered that they have made at least one of the one change as a result of PSD2 following changes (see Figure 3 below). ●● Fifty-three percent have invested in new As may be expected, banks account for the technology or IT infrastructure majority of changes, with only 6% making ●● Fifty percent have developed new products none of the above mentioned changes. or features ●● Forty-six percent adopted new working practices ●● Forty-five percent automated internal processes

Figure 3. Which, if any, of the following changes has your business made as a result of PSD2 coming into effect? (Multiple choice)

60% 53% 50% 50% 46% 45% 40% 43%

30% 35%

20% 24% 18% 10% 7% 0%

The one change that is likely to have had the Considering that the market has only been able most impact on business performance is the to move since September 2019, these figures are development of new products and/or features, quite remarkable. In less than six months, nearly with 40% stating this (see Figure 11). It perhaps half of those surveyed strongly agreed that PSD2 stands to reason that those who view open is an opportunity for their business (see Figure banking as positive for the economy are also 10). In addition, 71% stated the one change that significantly more likely (58%) to have seen is likely to have the most impact on business the most impact from the development of performance is either the development of new new products and/or features (see Figure 9). products and/or features or the investment in new technology (see Figure 11), which demonstrates A further 3 in 10 (31%) believe that the most tremendous progress. impact has come from investment in new IT infrastructure (see Figure 11).

40 | The Nordics are accelerating open banking opportunities across industries. Figure 11. Which ONE of these changes that your business has made as a result of PSD2 has had the most impact on business performance?

3% 4% 1% Developed new products 5% and/or features

Invested in new technology/ IT infrastructure 40% 8% Made improvements PSD2 to customer service Adopted new working impact on practices 8% performance Automated internal processes

Made other efﬁciencies to internal processes

Made stafﬁng/ personnel changes

31% None of these

“[ 40%] see developing new products and/or features as having the most impact on their business.”

Appendix: Nordic survey on open banking. | 41 The Nordics are leading the new era of innovation

For innovation around products and services, do you believe the rest of the EU is ahead of the Nordics?

There are many reasons for being optimistic on nearly two-thirds (64%) of those surveyed behalf of the Nordic region, which are covered in disagree with the assertion that the rest of Chapter 3 of this white paper. Not surprisingly, the EU is ahead of the Nordics.

Figure 4. The rest of the EU is ahead of the Nordic financial businesses when it comes to product and service innovation.

40%

35% 30% 29%

20%

16% 10% 8% 8% 4% 0% Strongly Tend Neither agree Tend to Strongly Don’t agree to agree nor disagree disagree disagree know

“Nearly two-thirds (64%) of those surveyed disagree with the assertion that the rest of the EU is ahead of the Nordics.”

Other countries across Europe have already been working with PSD2 data for some time, but with mixed results. The Nordics have adapted to open banking quickly and this can be attributed to a number of things; the region is already digitally advanced, there’s a real desire from the banks to be open in order for progress to be made and, unlike many parts of Europe, the Nordics very much take a collaborative and thorough approach, which all contribute to creating the perfect environment for open banking innovation.

42 | The Nordics are accelerating open banking opportunities across industries. Who will benefit the most from access to financial data through open banking platforms?

Which one of the following, if any, do you believe will benefit most from banks having to enable access to financial data?

There is common agreement amongst decision ●● A further 24% believe that fintech startups will makers that consumers will benefit the most from benefit most banks having to enable access to accounts: ●● Interestingly, it is the representatives from ●● Nearly half (45%) believe that consumers will larger companies with 100+ employees (39%) benefit most and annual turnovers of 5M Euros+ (40%) who see the fintech startups benefiting most

Figure 5. Which ONE the following, if any, do you think will benefit MOST from banks having to enable third-party access to customers?

50%

45% 36% 40%

30%

20% 24%

14% 10% 7% 5% 0% 3% 2% Consumers Finance Payment Small Retailers Banks Don’t know startups providers businesses

“[45%] believe that consumers will benefit most from open banking.”

Across industries – banks, accounting services, payment gateways, fintech startups – all will certainly benefit from the access to financial data, which enables the creation of relevant and convenient solutions for customers. Not only will they improve loyalty, but they will be able to provide frictionless onboarding for business and personal consumers.

Appendix: Nordic survey on open banking. | 43 The impact of open banking on the Nordic economy

Even though the economic impact of PSD2 at this point must be quite limited, 58% of those surveyed believe that PSD2 has had either a ‘very’ or a ‘fairly positive’ impact. Not surprisingly, the percentage is higher amongst the fintech companies (71%). In contrast, out of the complete population of those surveyed, only 5% believe that PSD2 has had a negative impact on the economy in any way.

“ [58%] believe that PSD2 has had a positive impact on the Nordic economy.”

Figure 9. Do you think PSD2 has had a positive or negative impact on the Nordic economy?

8% 11% 5%

PSD2 Very positive positive or Fairly positive No impact 29% negative Fairly negative impact Very negative Don’t know

47%

44 | The Nordics are accelerating open banking opportunities across industries. Access to financial data through open banking technology as an opportunity for businesses

Data is often considered the new oil; it should probably come as no surprise then that 82% of those surveyed answer in affirmative to PSD2 being an opportunity for their business, with 48% strongly agreeing. Within the group of fintechs, 93% agree that this is an opportunity for their businesses, with 63% strongly agreeing.

“[82%] see access to financial data as an opportunity for their business.”

Figure 10. Access to financial data through PSD2 is an opportunity for your business.

50% 48%

40%

34% 30%

20%

10% 8% 5% 0% 3% 2% Strongly Tend to Neither agree Tend to Strongly Don’t agree agree nor disagree disagree disagree know

The arrival of open banking has signalled the beginning of the biggest transition in financial data rights across the EU, and a new era of innovation. The big opportunity currently being explored across industries is to become the preferred interface of customers, that being business-to-business or business-to-customer focused. This will be followed by further open banking innovation through account aggregation, access to a wider scope of financial data through premium APIs and payment initiation – allowing companies to offer tailored products and services based on financial data.

Appendix: Nordic survey on open banking. | 45 How will open banking change the business landscape in the Nordics

How do you think financial institutions opening their payment infrastructure and customer data to third parties will change the business landscape in the Nordics?

Decision makers in the Nordic financial ●● Seventy-nine percent expect an increase institutions definitely believe that PSD2 and open in AI technology banking will change the business landscape: ●● Sixty-eight percent expect a more ●● Eighty-one percent expect PSD2 to bring prosperous economy challenges to major payment providers

Figure 12. How do you think financial institutions opening their payment infrastructure and customer data to third parties will change the business landscape in the Nordics? (Multiple choice) 100%

90% 88% 75% 82% 81% 79% 68% 50% 58% 56%

25%

0% 1%

The nature of PSD2 is clearly understood, with 81% of those surveyed expecting it to bring challenges to major payment providers. As we’ve seen with the changes that have already been made, the challenges witnessed and the appreciation that it is the consumer who will benefit most (as shown in Figure 5), it is perhaps no surprise that 82% expect pressure to improve customer service.

“[82%] of those surveyed expect pressure to improve customer service.”

The findings of the survey clearly add up to paint gateway to growth. The opportunities are clear for a positive picture of Nordic decision makers’ developing a more customer-centric and attitudes and expectations towards PSD2 and open innovative offering, not just an operational banking, and the coming opportunities of open necessity. Through collaboration and partnerships, banking and the innovation to follow. The arrival of it has the biggest implications for progression than PSD2 and open banking should be viewed as a any other regulation regarding financial data.

46 | The Nordics are accelerating open banking opportunities across industries. The Nordics are moving at a good pace in response to the directive

Have you had to implement changes to your business and/or product strategy due to PSD2?

Fifty-one percent of the surveyed businesses ●● More than a third (36%) still disagree that they confirm that they have had to implement some have had to implement any changes as a direct kind of changes to business and/or product result of PSD2 strategy as a result of PSD2. Unsurprisingly, within ●● This rises significantly to nearly half (47%) of the group of surveyed banks, the percentage is businesses with an annual turnover of up to significantly higher (72%). 5M Euros

Figure 13. Your business has experienced challenges responding to PSD2.

Agree Neither agree nor disagree Disagree Don’t know

Accounting services 47% 16% 32% 5%

Banking 41% 22% 34% 3%

Fintech startups 34% 17% 46% 3%

Payment providers 22% 11% 56% 11%

0 25 50 75 100

“[51%] of the surveyed businesses confirm that they have had to implement changes as a result of PSD2.”

Based on those who have not implemented any In these early stages of PSD2, the Nordics are changes, it comes as no surprise that a third of moving at a good pace in response to the businesses with an annual turnover of up to 5M directive, but these first 6 to 12 months will Euros (32%) strongly disagree that their business see most of the movements taking place is finding it challenging to respond to PSD2. in the background – becoming compliant, understanding the opportunities, building ●● Nearly 4 in 10 (38%) agree that their business teams to respond, automating processes, is finding it challenging to respond to PSD2 developing interfaces and providing account ●● Ten percent strongly agreeing aggregation externally as a minimum. ●● Interestingly, 40% of those surveyed disagreed that PSD2 presented a challenge

Appendix: Nordic survey on open banking. | 47 Resources are the biggest challenge across industries when answering to PSD2

Which of the following challenges, if any, have you experienced as a result of PSD2 coming into effect?

Overall, 46% of those surveyed have been Interestingly, customer loyalty is less of a challenged by a lack of resources to build new challenge at present, due to the lack of awareness solutions based on PSD2. We would expect to see amongst consumers. If the right interface offering the data around ‘difficulty with tech supporting the right convenience enters the market it could PSD2 and incorporating it into current offers’ be the signal for a wave of migration, rendering reduced within the next 6 to 12 months, as customer loyalty atop the list of challenges. interfaces become much more competent Again, acquisition strategies will drastically help and the market matures. bigger organisations respond to PSD2 in a more agile and digital-first way.

“[46%] of those surveyed have been challenged by a lack of resources to build new solutions based on PSD2.”

Figure 14. Which of the following challenges, if any, have you experienced as a result of PSD2 coming into effect? (Multiple choice)

50% 46% 40% 42% 38% 30% 33% 30% 28% 27% 20% 17%

10% 12% 11%

Nonethese of Decrease in Fallingcompetitors behind

supporting PSD2 customer loyalty smaller companies Increased competition the changing market Lack of resourceDifficulty to build with technology Difficulty keeping up fromwith larger companies Increased competition from Difficulty incorporating PSD2 two-stage authentications new solutions based on PSD2 Customer difficulties with using solutions into your current offer

48 | The Nordics are accelerating open banking opportunities across industries. Don’t miss out on your open banking opportunities

About Nordic API Gateway

Founded in 2018, Nordic API Gateway is an open banking platform designed to support financial innovation by firmly connecting companies from all kinds of industries to bank data. To further build frictionless financial futures for all, Nordic API Gateway enables direct payments on behalf of users, and has received investment from the two leading banks in the Nordics, DNB and Danske Bank. Headquartered in Copenhagen, Nordic API Gateway currently employs nearly 60 people and has been nominated as payment influencer of the year at Merchant Payment Ecosystem Awards 2020.

Learn more about how your business can build open banking solutions today.

Michael Juul Andersen Chief Business Development Officer [email protected]

Twitter

www.nordicapigateway.com

Appendix: Nordic survey on open banking. | 49

Endnotes

1 https://www.smartinsights.com/internet-marketing-statistics/happens-online-60-seconds/

2 https://www.smartinsights.com/internet-marketing-statistics/happens-online-60-seconds/

3 https://www.weforum.org/agenda/2019/03/what-happens-in-an-internet-minute-in-2019

4 https://www.weforum.org/agenda/2019/03/what-happens-in-an-internet-minute-in-2019

5 https://www.weforum.org/agenda/2019/03/what-happens-in-an-internet-minute-in-2019

6 MoneyMag 2017, p.36-37 https://norfi.co/Vestager

7 norden.diva-portal.org/smash/get/diva2:1295022/FULLTEXT01.pdf

8 https://assets.new.siemens.com/siemens/assets/api/uuid:e9379a0b25e0f843eab6248dcee83cf2d1ba0a2d/version:1531211164/digital-nordics-report-uden-sk-r.pdf

9 norden.diva-portal.org/smash/get/diva2:1295022/FULLTEXT01.pdf

10 https://www.spglobal.com/ratings/en/research/articles/200204-tech-disruption-in-retail-banking-nordic-techies-make-mobile- banking-easy-11325923

11 www.nationalbanken.dk/da/publikationer/Documents/2006/08/Nordic_banking_structures.pdf p4-5

12 www.nationalbanken.dk/da/publikationer/Documents/2006/08/Nordic_banking_structures.pdf p4-5

13 https://www.finextra.com/newsarticle/33870/is-open-banking-being-hobbled-by-outages/openapis?source=post_page------

14 https://worldline.com/en/home/blog/2017/july/psd2-nordic-angle.html

15 https://ecommercenews.eu/ecommerce-in-denmark-to-be-worth-e21-45-billion-in-2020/?amp

16 https://www.imrg.org/nordics-online-mobile/

17 https://www.imrg.org/nordics-online-mobile/

18 https://www.imrg.org/nordics-online-mobile/

19 https://www.spglobal.com/ratings/en/research/articles/200204-tech-disruption-in-retail-banking-nordic-techies-make-mobile- banking-easy-11325923

20 https://www.fintechfutures.com/2019/10/norways-largest-bank-set-to-monopolise-country-with-all-access-mobile-banking-app/

21 https://www.finextra.com/newsarticle/35269/dnb-introduces-payment-initiation-via-account-aggregation-app/payments

22 https://blog.nordicapigateway.com/how-dinero-put-accounting-on-autopilot-with-nordic-api-gateway

23 Video: “How Billy is revolutionising the accounting space” https://www.youtube.com/watch?v=2QblfCjukHM

24 https://www.computerworld.com/article/3429598/saxo-bank-reduces-customer-onboarding-to-one-hour-using-machine-learning. html

25 https://www.ravelin.com/insights/ultimate-guide-psd2-strong-customer-authentication?utm_term=%2Bpsd2%20sca&utm_cam- paign=PSPs+-+Europe&utm_source=adwords&utm_medium=ppc&hsa_ver=3&hsa_grp=80384366390&hsa_kw=%2Bpsd2%20 sca&hsa_tgt=kwd-728595058007&hsa_mt=b&hsa_acc=6420205522&hsa_net=adwords&hsa_ad=367713276382&hsa_src=g&hsa_ cam=1081482454&gclid=EAIaIQobChMIoI6A3Lfg5wIVleJ3Ch10AQ-GEAAYAiAAEgLCxfD_BwE

26 https://thepaypers.com/interviews/whats-next-for-merchant-payments-ecosystem-in-2020--1240400